On September 20, one day after the US Federal Reserve (FED) decided to cut interest rates by 0.5 percentage points, the USD price at commercial banks in Vietnam dropped sharply by 120 VND, down to 24,360 - 24,700 VND/USD for sale. The central exchange rate announced by the State Bank of Vietnam (SBV) also dropped by 19 VND, down to 24,148 VND/USD. Experts say this is a positive signal for interest rates and the Vietnamese economy.
Global interest rates cool
According to Dragon Capital Investment Fund, the FED's interest rate cut has helped reduce pressure on the exchange rate, with the VND increasing by more than 3% compared to 2 months ago, helping the USD/VND exchange rate cool down significantly. This creates the premise for more stable lending and deposit interest rates in Vietnam, contributing to promoting disbursement for public investment and credit growth for enterprises, supporting growth targets.
Experts expect exchange rates and interest rates to continue to decrease in the coming time to support the economy. Photo: TAN THANH
Dr. Can Van Luc and the group of authors from BIDV Training and Research Institute have just released a report on the FED's official roadmap to lower interest rates and its impacts on the world economy and finance and Vietnam. Accordingly, the FED's interest rate reduction will cause the USD to depreciate against most other currencies (including VND), reducing exchange rate pressure.
From the peak of 4.9% depreciation at the end of May, the exchange rate has now increased by only about 1.6% and the VND is forecast to only depreciate by about 1.3% - 1.7% for the whole year. "The stable exchange rate contributes to reducing import costs while exports are not much affected due to the structure of the economy" - Dr. Can Van Luc analyzed.
One of the major impacts of the FED's reversal of interest rate policy is that the State Bank will have room to operate monetary policy and stabilize interest rates. According to Dr. Can Van Luc, the FED's interest rate reduction will cause global interest rates to cool down.
In Vietnam, foreign currency interest rates - especially in USD and EUR - have decreased, contributing to stabilizing the general interest rate level (in the context of increasing mobilization interest rates), reducing the cost of foreign currency loans for both old and new loans. According to the State Bank of Vietnam, the level of dollarization or USD debt in Vietnam currently accounts for about 6.4% of total outstanding debt for the economy.
In addition, the cost of borrowing capital of the Government and foreign direct investment (FDI) in foreign currency has also decreased, contributing to reducing debt risks and stimulating credit and investment in the coming time. "The FED's initiation of a monetary policy easing cycle is basically a positive impact on the economy, but there are still many unpredictable risks and challenges. To ensure the implementation of the socio-economic development goals and targets set by the National Assembly and the Government, it is necessary to maintain a steadfast monetary policy, continue to flexibly use various tools to stabilize interest rates, exchange rates, foreign exchange markets, and gold markets, contributing to promoting growth and controlling inflation within the target" - Dr. Can Van Luc said.
Expected loan interest rates to decrease by another 0.5 - 1 percentage point
Mr. Suan Teck Kin, Head of Global Markets and Economics Research, UOB Bank (Singapore), commented that despite the impact of the recent storm and the significant recovery of the USD/VND exchange rate since July 2024, the SBV is expected to maintain the key policy interest rate for the rest of the year. "The SBV is likely to adopt a more targeted approach to support affected individuals and businesses in their region, instead of deploying a broad tool nationwide such as cutting interest rates. The SBV is expected to maintain the refinancing rate at the current 4.5% and focus on facilitating credit growth, along with other support measures," said Mr. Suan Teck Kin.
Commenting on Vietnam's exchange rate and interest rate in the coming time, Ms. Do Minh Trang, Director of the Analysis Center, ACB Securities Company (ACBS), said that if US inflation follows the right path, the FED will certainly continue to reduce interest rates and the "soft landing" scenario of the US economy is possible. That will have a positive impact on many trade partners with the US, including Vietnam. Specifically, Vietnam will have less pressure on exchange rates, reduce the cost of importing raw materials and products in the coming time, thereby promoting import and export activities.
In addition, the State Bank has more room to implement monetary easing policies to support Vietnam's economic growth in the coming time. In particular, the northern provinces that have just experienced a natural disaster need a lot of support, including interest rate support to rebuild production and business activities after storms and floods.
In addition, keeping interest rates and exchange rates stable at low levels will help attract foreign investors to return to the Vietnamese stock market in the near future. FDI capital flows, which were already good, are now even more positive.
Mr. Nguyen The Minh, Director of Analysis at Yuanta Vietnam Securities Joint Stock Company, also shared the same opinion when he said that Vietnam has a lot of room to reduce deposit and lending interest rates if the FED further reduces interest rates. "When the value of the USD decreases more, the State Bank only needs to further reduce the open market interest rate (OMO) and bank interest rates, helping to reduce input costs of the banking system.
From there, commercial banks have the conditions to reduce another 0.5 - 1% of lending interest rates for enterprises producing consumer goods and exporting, especially those affected by storms and floods. At the same time, the State Bank can buy USD to increase foreign exchange reserves, meaning the supply of VND will increase. Commercial banks can reduce deposit interest rates, causing lending interest rates to decrease accordingly," Mr. Minh analyzed.
State Bank is proactive in management
From the perspective of the management agency, Mr. Pham Chi Quang, Director in charge of the Monetary Policy Department (SBV), said that the FED's increase and decrease in interest rates is a normal operating activity, within the publicly announced schedule. Recently, the FED has sharply increased interest rates and maintained them at high levels from 2022 to present, causing great pressure on exchange rates and interest rates in many countries, including Vietnam.
Therefore, when this agency reduces interest rates, these pressures also decrease, as shown by the recent sharp decline in market exchange rates. In that situation, the State Bank has proactively reduced OMO interest rates and treasury bill interest rates to continue reducing lending rates to support businesses and people, thereby contributing to promoting economic growth.
Source: https://nld.com.vn/co-hoi-giam-them-lai-suat-cho-vay-196240920203627792.htm
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